What’s Sexy VS What Sells: A Study of ROI by Channel for E-Commerce

August 9th, 2012

Pinterest. Facebook. Blogs. SEO. Retargeting. Google AdWords. Twitter. Affiliate Programs. Referrals. Email Marketing. Banner Ads. And the list goes on. With so many potential inbound marketing channels, how is an e-commerce company supposed to know where to focus its time, energy, and, of course resources?

As with any business decision, it’s important to consider ROI of each channel when determining where to spend resources (both time and money!). Do you hire a Social Media Director to build your business’ presence on Facebook and Pinterest? Spend time reaching out to bloggers to drive referral traffic? Invest in banner ads? Hire an SEO firm? With unlimited resources, you would want to do it all. However, that’s not a reality for most businesses, so it’s important to look at the traffic that each channel can drive AND how that traffic translates into revenue.

We took a look at some of our most successful e-commerce clients: sites with fundamentally strong merchandising and user experiences, to see what converts – not just what drives traffic and feels good (hey, everyone’s ego loves a good press credit!), but what actually sells. What we found might surprise you. We looked at the breakdown of both site visits and revenue by channel, looking to see how the two related to one another – would a channel driving 25% of site visits also drive 25% of revenue? The resounding answer is no. Steadily, some channels overperform in terms of revenue, while others underperform.

Wondering which channels pulled their own weight? The overwhelming overperformers were organic search, email, and paid search – each of these channels generated a higher percentage of revenue than visits, meaning that resources invested in them should show a high ROI. And the channels that didn’t perform as well? Referral (blogs, press credits, etc.) and social media. These channels are responsible for driving a significantly higher percentage of traffic compared to the percentage of revenue.

So, what does this mean for your business? While we’re not recommending that anyone shut down their company Facebook page or stop reaching out to bloggers, if short-medium term ROI and revenue is important for your business then ROI by channel is critical to consider. We often see clients get caught up in the hype of social media and PR. They spend significant time and money on these channels, and get frustrated when they don’t see the return, when the reality is that it’s the nature of the channel and not their particular efforts. On the flipside, spending time on SEO or PPC campaigns isn’t particularly sexy and probably won’t have all of your friends in awe, but maximizing these channels has a higher ROI and will help drive more revenue, often at a higher margin. Focusing on growing traffic via these channels, along with developing strong landing pages and merchandising on-site, pays off – and pays the bills.